Shares of rival telecom firms Bharti Airtel and Reliance Industries soared to a fresh record high on Tuesday afternoon, even as the industry moves towards higher tariffs in the coming days, easing their financial burden.
Shares of rival telecom firms Bharti Airtel and Reliance Industries soared to a fresh record high on Tuesday afternoon, even as the industry moves towards higher tariffs in the coming days, easing their financial burden. Reliance Industries soared by more than 3.8% to hit the day’s high at Rs 1,514 on BSE. The Mukesh Ambani-led firm achieved a major milestone as Reliance Industries became the first Indian firm to cross Rs 9.5 lakh crore in market capitalisation. Bharti Airtel shares gained by more than 9% to hit the day’s high at Rs 445 on BSE. Notably, Bharti Airtel and Vodafone Idea have announced that they will raise mobile services tariffs from the month of December 2019 to remain viable and recoup from financial stress.
Interestingly, global brokerage firm Morgan Stanley has an overweight call on Reliance Industries shares, and has announced its bull case target price at Rs 2,000 on hope of higher refinery margins, potential telecom tariff hike, bottoming P/E cycle, kickstart of gas production, lower capex and ongoing deleveraging. Given the impending tariff war in the sector, Reliance Jio may emerge as a major beneficiary as new users may gravitate towards its less expensive services. According to Anand Rathi, with the investment cycle likely having peaked, Anand Rathi the return on investment (RoI) trajectory is likely to improve going forward.
Following Q2 results, Jefferies has upgraded Bharti Airtel to hold from underperform and raised target to Rs 407 from Rs 280 per share. “We expect price increase from Q1FY21, though valuations are at 9x FY22e mobile EBITDA. We factor in 20 percent price hike in FY21, but the risk in postpaid & enterprise keeps upside limited,” Jefferies said in its report. “Our assessment suggests the possibility of 15 percent hike by Vodafone Idea (VIL) and Bharti. For both VIL and Bharti the hike will be on 45 percent of their customer (non-feature phone) or 70 percent of their revenue. For Bharti it will be on 40 percent of consolidated EBITDA,” Motilal Oswal noted in a recent report. Both the firms have not yet announced any quantum of hike.